If you’ve caught the news lately you’d be excused for thinking the sky was falling in. Australia’s house prices are collapsing! Auction clearance rates are plummeting! We’ll all be rooned!
New data today shows that national property prices have declined for the last three months, -0.9 per cent from their peak.
But guess what? National prices are still 5.8 per cent higher than they were a year ago.
Weren’t we complaining a year ago that property prices were far too high? Well, now they’re 5.8 per cent higher than that.
According to today’s PropTrack Home Price Index, property values are also sitting at record highs in every regional area of Australia, except in Queensland.
The combined regional median property price is currently 9.5 per cent higher than a year ago.
Why are regional property prices so high, and rising so quickly? Partly because people are abandoning Australia’s major cities in search of cheaper housing.
The median value of all dwellings in Sydney is $1.23 million (up 17.5 per cent in 5 years). In Brisbane it is $1.07 million (up 84.6 per cent in five years), while Perth is $1.01 million (up 96.2 per cent), and Adelaide is $942,000 (up 81.2 per cent).
Those rapid price increases have been socially destructive.
But the expectation of ever-rising property prices is also, incoherently, feeding a sense of national “crisis” whenever property prices drop a bit because our housing-industrial complex needs prices to keep rising for large sections of the electorate to be happy and big parts of the economy to remain profitable.
What kind of system is this?
It’s a question the Australian filmmaker Kane Guglielmi is asking in a new documentary, Common Wealth.
‘Conservatively-raised capitalist’ questions his assumptions
Guglielmi moved overseas at the start of the COVID-19 pandemic, but when he returned to Australia shortly afterwards he couldn’t believe what had happened to property prices here.
How Australian property prices had risen so quickly and reached absurd levels is the premise of the documentary Common Wealth. (Supplied: Darkwood Entertainment)
He found property prices had risen so quickly, and had reached such absurd levels, that it contributed to his deep depression.
He says he didn’t understand why our housing market behaved that way, so he decided to find out and to document his journey.
That’s the premise of the film.
Guglielmi presents himself as a typical Aussie who loves his small family, who has a mortgage, and who just wants to live his life.
But since our housing and tax system has been slowly tearing communities apart it forced him to seek answers about the drivers of big economic forces that cause so much pain for millions of people.
He says that as a “conservatively-raised capitalist” some of the concepts he was introduced to on his journey were initially quite confronting.
Our common ‘wealth’ comes from land and natural resources
Gugliemli realises that a lot of our problems come down to land ownership.
Who owns land in Australia? Why do some people have access to land and others don’t? How cheap would house prices be if land values weren’t part of the equation?
Those questions lead him to contact economist Karl Fitzgerald who spends a lot of time thinking about property rights and land taxation.
Fitzgerald works at Prosper Australia, one of Australia’s oldest social reform organisations and think tanks which traces its roots to the 1890s.
Fitzgerald explained to Gugliemli that a lot of Australia’s “wealth” derives from land and how the value of land increases by the productive efforts of society, but rising land values are often captured by the private owners of land rather than by the community.
Gugliemli confesses that those ideas seem strange to him. He’s being introduced to “Georgist” concepts about land, value, and resource rents.
Henry George (1839-1897), an American land reformer and economist, famously argued that taxes on labour and business income could be dramatically cut, and poverty alleviated, if governments learned to tax land properly.
Gugliemli says he’ll try to keep an open mind.
“Everybody works but the vacant lot,” by Henry George. (Supplied: The New York Public Library Digital Collections. 1865 – 1899, General Research Division, The New York Public Library)
He then travels to Singapore where he asks officials how they built a society with such high rates of home ownership on such a famously small area of land.
Whether Australians know it or not, the Singaporeans also drew on Georgist insights to build affordable homes for millions of citizens while keeping property prices low and sustainable.
Gugliemli then visits the United Kingdom, Switzerland, Mexico, Italy, and the United States. Each time he talks to someone new, whether an economist or bureaucrat or citizen, it raises more questions about Australia’s policy choices and it makes his head swirl.
He travels to Norway to talk to officials there about their $3 trillion sovereign wealth fund, which invests the proceeds of Norway’s oil and gas production for the benefit of Norwegians.
He even visits Alaska to learn more about the Alaska Permanent Fund, which turned the royalty wealth from Alaska’s finite oil and mining reserves into a multi-billion dollar fund that also pays every Alaskan an annual dividend which they can spend or save how they please.
By the end of the film the audience can’t help wondering: why do Australia’s politicians keep giving Australia’s natural resources away for so little?
If you don’t play the property game you lose
Gugliemli doesn’t pretend to have the answers.
He starts his journey with deceptively simple questions about house prices, but they lead to much deeper questions about land ownership, land value capture, natural resources and resource rents, alternative democratic systems, and our dreams for a better future for our children.
It becomes quite philosophical.
He wonders if Australia can do better as a society, with housing and the taxation of its natural resources, but he leaves it to the audience to think more about the topics.
He says his film was financed by donations, including a couple of large donors credited as executive producers of the film, and by himself and his wife. He said his large donors agreed that they would have no say over what the film would look like nor what its conclusions would be.
He said he contacted all of the guests in the film on his own because that’s where his research led him.
If you haven’t heard of Gugliemli, he made a romantic comedy called Cooped Up, released in 2016, about a man who contracts a coronavirus in China and who returns to Sydney and is then forced to quarantine at home.
In 2020, four years after that film was released when the COVID-19 pandemic hit, people on the internet suddenly noticed the uncanny storyline.
When the ABC spoke to him this week he had just walked in the door after being on the road touring his new film about housing and resource taxation.
He said he remembered how he felt when the Reserve Bank began lifting interest rates aggressively in 2022 after house prices had gone nuts on historically-low interest rates.
He said he’d played by the rules and thrown himself into debt to become a property owner, but that moment when interest rates started rising rapidly in 2022 made it feel like the whole system was rigged against normal people.
He said he disliked how if you try to avoid playing the property game in Australia it will be to your detriment.
And as the media’s attention today is hyper-focused on last month’s 0.4 per cent decline in national property prices, it’s hard not to think about some of the questions he raises in his film.
